Insurance Contracts and Principles

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What is the purpose of taking out life insurance in a stranger-originated life insurance transaction?

To sell the policy to the investor for a profit (correct)

To leave a legacy for the insured's beneficiaries

To purchase a term life insurance policy

To provide financial protection for the insured's dependents

Which of the following is NOT an essential element of an insurance contract?

Negotiating (correct)

Offer

Consideration

Acceptance

Who does an agent typically represent in an insurance transaction?

The insurer (correct)

The broker

The insurance company

The policyholder

When must an insurable interest exist in a life insurance policy?

At the time of application Signup and view all the answers

Which type of life insurance policy requires an agent to register with the NASD?

Variable Life Signup and view all the answers

What provision allows a policy owner to exchange a term policy for a whole life policy without providing proof of good health?

Conversion provision Signup and view all the answers

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed Signup and view all the answers

On a life insurance policy, who is qualified to change the beneficiary designation?

Policyowner Signup and view all the answers

What happens to an incomplete life insurance application submitted to an insurer?

Application will be returned to the writing agent Signup and view all the answers

When must a policyowner have insurable interest on the insured for the life policy to be valid?

At the time of application Signup and view all the answers

Who needs to initial changes made on an insurance application?

Applicant Signup and view all the answers

What may happen to an applicant's risk category due to a health issue?

It will be recategorized Signup and view all the answers

What dividend option should a young, married teacher with a Whole Life policy select to protect against inflation?

Paid-Up Additional Insurance Signup and view all the answers

How is accumulated interest earned on dividends from an insurance policy taxed?

As ordinary income Signup and view all the answers

When can a policyowner change a revocable beneficiary?

Anytime Signup and view all the answers

Under the Common Disaster clause, what happens to the death proceeds if the policyowner and beneficiary are both killed in an accident?

The death proceeds are paid to the contingent beneficiary Signup and view all the answers

What type of beneficiary is a son if the policyowner can change the beneficiary designation at any time?

Revocable beneficiary Signup and view all the answers

Which type of beneficiary designation limits the policyowner's rights?

Irrevocable beneficiary Signup and view all the answers

What type of group life insurance plan would a corporation have if its employees share in the cost of insurance?

Contributory Signup and view all the answers

What type of annuity does W have if she purchased an annuity to provide income for life starting at age 60?

Immediate annuity Signup and view all the answers

What type of annuity does T have if the contract guarantees an income payment for the rest of his life and guarantees payments to his son for 20 years if he dies before?

Life Annuity with Period Certain Signup and view all the answers

What is an element of a Single Premium annuity?

Lump-sum payment Signup and view all the answers

What type of annuity represents the largest possible monthly payment to an individual annuitant?

Straight Life annuity Signup and view all the answers

What is a characteristic of an immediate annuity?

Benefit payments start within one payment period of purchase Signup and view all the answers

How long must a life insurance policy be in force before an insurance company must pay death benefits for suicide?

2 years Signup and view all the answers

Which of the following activities is NOT considered doing insurance business?

Selling mutual funds Signup and view all the answers

Which provision is NOT typically included in life insurance policies?

Extended Term Signup and view all the answers

What does a certificate of authority permit an insurance company to do?

Transact business in Texas Signup and view all the answers

What must an agent do during a sales presentation for a participating life insurance policy?

Include a statement that dividends are not guaranteed Signup and view all the answers

What happens if an insurance company discovers an insured's age was misstated on the application for life insurance?

The company pays the policy proceeds in the amount the premiums would have purchased at the insured's actual age Signup and view all the answers